Responsible investment is a mantra among Europe’s corporate governance circles in 2017, gaining supporters by the minute among investors, particularly the young. It is also potentially big business for asset managers keen to jump on that band wagon for branding. But a report just out finds striking variation in both the performance and the transparency of the largest asset managers operating in Europe.

Research conducted by ShareAction, a non-profit group in the U.K. that campaigns for responsible investment, ranks the 40 mega-managers who, between them, invest over €21 trillion ($22.4 trillion) on behalf of pension schemes, charities, universities, and individuals across the world. All of them bar one – - Santander Asset Management – are signatories to the Principles for Responsible Investment (PRI).

The top five performers (scoring out of a possible 90 points) are: Schroder Investment Management (82), Robeco Group (81), Aviva Investors (80), Amundi (77.5), and Standard Life Investments (76.5).

Topics engaged with in the last year : ShareAction Research[+][-] March 2017

ShareAction research reveals only eight asset managers, or 20%, provide a full list of companies they have engaged with over the year.Only seven asset managers, or 17.5%, go beyond the minimum legal requirements, “and even attempt to provide additional explanations of potential direct or indirect fees and charges on their website” it says. And seven asset managers, or 17.5% “do not include any information at all on environmental and/or social impacts within regular reporting to clients or public reporting.

ShareAction, London March 12, 2017

Catherine Howarth, CEO ShareAction

“Our research exposes a huge gulf in performance between the best and worst firms. This places a big responsibility on pension funds and other institutional clients to undertake rigorous due diligence on the factors assessed in this survey, all of which have a bearing on the interests of beneficiaries such as pension savers” says Catherine Howarth, Chief Executive of ShareAction.

The asset managers have been assessed firstly on their transparency, including the accessibility of information about voting and engagement with investee companies, conflicts of interest policies, and disclosure of investment fees and charges.

All the managers were also sent a questionnaire allowing them to explain in more detail how their investment process incorporates Environmental, Social and Governance (ESG) factors that are relevant to investment performance. Some 31 out of 40 managers (77.5%) completed the questionnaire and were scored accordingly.

I can’t help wonder if the remaining nine who did not complete the questionnaire were just “too busy.”

Instead, it says, “the majority of existing investment frameworks claiming to give investors the tools they need to assess whether a company is an ethical investment, actually just report on whether companies have social policies and governance structures in place, rather than if these efforts are actually making a difference.”

ShareAction’s survey also includes questions on measuring the tangible impact of European asset managers’ investment decisions including their stewardship work “to reflect the growing interest by clients and the investing public in this area.”

There’s another important point from this year’s survey. “An example of impact measurement is examining, year on year, the carbon footprint of investee companies. Only two asset managers provide comprehensive detail on the impacts of their investments (Natixis and Robeco)” says the ShareAction research report.

“We hope this report will stimulate speedy improvement in the performance of poorly ranked firms, and we have provided individual recommendations for each of the 40 asset managers to help achieve that outcome,” says Ms. Howarth.

ShareAction’s report is timely. Under new measures just signed off by the European Commission, asset managers will be forced to provide investors with predictions of fund performance in the event of another financial crisis.

The measures – which have been called controversial - are aimed at strengthening consumer protection, and will ensure investor documents include forecasts of fund performance during distressed market conditions, the Financial Times reported.

‘Responsible Investment’ is becoming a badge you have to earn, not merely a plaque you can buy and put on your front door, it seems.